Guotai Haitong: Maintain "Buy" rating on PRADA (01913), Versace opens a new chapter in collaboration with PRADA after 26 years.

Guotai Haitong releases research report, maintaining a "buy" rating for PRADA (01913), with Miu Miu's expansion continuing in 2026 and contributing new volume to Fendi. The bank expects the company's net profit attributable to shareholders to be 880 million/960 million/1.05 billion euros respectively for the years 2025-2027, with year-on-year increases of 5.2%/8.7%/9.0%. They are giving a 20XPE for 2025, converting to a target price of 64.13 Hong Kong dollars with 1 euro equals 9.3 Hong Kong dollars. Guotai Haitong released a research report: Stable performance under high base, exchange rate fluctuations may disturb profits in the short term The bank expects that the group's annual retail sales in 2025 will increase by a high single-digit figure year-on-year at constant exchange rates, leading the industry. They forecast that the retail sales in Q4 of 2025 will increase by a mid-single-digit figure year-on-year at constant exchange rates, slightly slower than Q3. On the brand side, they expect Prada's retail growth in Q4 of 2025 to improve from -1% in Q3 to basically flat, while Miu Miu's retail growth in Q4 of 2025 is expected to be 15-20%, considering the high base of the past two years, the brand's popularity, and momentum. In terms of profit, the bank estimates that the negative impact of exchange rates in Q4 of 2025 will be about 700 bps, and about 400 bps for the full year. Continued expansion of Miu Miu's space in 2026, Fendi's contribution to new volume Looking ahead to 2026, the bank expects Miu Miu to contribute an additional 10%-15% of retail space, focusing on the Eurasian region, and further expanding into the low penetration US market in 2027. The Prada brand focuses on the balance of "strategic price points", reaching the mass market by strengthening the nylon series, while attracting high-net-worth customers with limited edition leather goods. Fendi's acquisition was officially completed on December 2, 2025 and is expected to be consolidated in 2026. According to the announcement, Fendi's revenue was approximately 705 million euros as of the end of March 2025, with an operating loss of about 46 million euros, and future synergies will be achieved through shared supply chain and retail operations. Stable overall customer base, industry entering a new normal The Chinese market is bottoming out, with stable consumption power for Chinese tourists compared to Japan where short-term tourism consumption is hindered. In Europe, the impact of weak tourism is slowing down. The US market remains steady despite a high base. The bank believes that the luxury goods industry has transitioned from high-speed growth to a "new normal", characterized by market share concentration towards companies with strong brand DNA. The industry trend is shifting from explicit consumption and brand-driven to authenticity and value-driven. Outlook for the future Continued optimism for Miu Miu's growth space, mainly coming from: 1) sustained high-quality growth of the brand, with most of the growth under high base coming from same-store contributions; 2) significant potential for future store openings, with 147 directly operated stores globally by the end of 2024, while YSL and BV have over 300 stores each; 3) establishing a differentiated brand image in recent years, benefiting from the industry trend of entry-level consumers diverting from high luxury. Prada's improvement in Q3 of 2025 is promising for the future, as the brand continues to increase creative investment in leather goods, market icon products such as Galleria, expand the sustainable nylon series to enhance entry-level products, and widen consumer coverage. Risk warning Deterioration of the retail environment, intensification of industry competition, deterioration of brand partnerships.